The surprising truth about American manufacturing

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CSM

The decline in American manufacturing is a common refrain, particularly from Donald Trump. “We don’t make anything anymore,” he told Fox News last October, while defending his own made-in-Mexico clothing line.

On Tuesday, in rust belt Pennsylvania, he doubled down, saying that he had "visited cities and towns across this country where a third or even half of manufacturing jobs have been wiped out in the last 20 years." The Pacific trade deal, he added, "would be the death blow for American manufacturing."

Without question, manufacturing has taken a significant hit during recent decades, and further trade deals raise questions about whether new shocks could hit manufacturing.

But there is also a different way to look at the data.

In reality, United States manufacturing output is at an all-time high, worth $2.2 trillion in 2015, up from $1.7 trillion in 2009. And while total employment has fallen by nearly a third since 1970, the jobs that remain are increasingly skilled.

Across the country, factory owners are now grappling with a new challenge: Instead of having too many workers, as they did during the Great Recession, they may end up with too few. Despite trade competition and outsourcing, American manufacturing still needs to replace tens of thousands of retiring boomers every year. Millennials may not be that interested in taking their place. Other industries are recruiting them with similar or better pay. And those industries don’t have the stigma of 40 years of recurring layoffs and downsizing.

“We’ve never had so much attention from manufacturers. They’re calling and saying: ‘Can we meet your students?’ They’re asking, ‘Why aren’t they looking at my job postings?' ” says Julie Parks, executive director of workforce training at Grand Rapids Community College in western Michigan.

The region is a microcosm of the national challenge. Unemployment here is low (around 3 percent, compared with a statewide average of 5 percent). There aren’t many extra workers waiting for a job. And the need is high:1 in 5 people work in manufacturing, churning out auto parts, machinery, plastics, office furniture, and medical devices. Other industries, including agribusiness and life sciences, are vying for the same workers.

The factory owner who's recruiting high schoolers
For factory owners, it all adds up to stiff competition for workers – and upward pressure on wages. “They’re harder to find and they have job offers,” says Jay Dunwell, president of Wolverine Coil Spring, a family-owned firm. “They may be coming [into the workforce], but they’ve been plucked by other industries that are also doing as well as manufacturing,”

Mr. Dunwell has begun bringing high school juniors to the factory so they can get exposed to its culture. He is also part of a public-private initiative to promote manufacturing to students that includes job fairs and sending a mobile demonstration vehicle to rural schools. One of their messages is that factories are no longer dark, dirty, and dangerous; computer-run systems are the norm and recruits can receive apprenticeships that include paid-for college classes.

At RoMan Manufacturing, a maker of electrical transformers and welding equipment that his father cofounded in 1980, Robert Roth keeps a close eye on the age of his nearly 200 workers. Five are retiring this year. Mr. Roth has three community-college students enrolled in a work-placement program, with a starting wage of $13 an hour that rises to $17 after two years.

At a worktable inside the transformer plant, young Jason Stenquist looks flustered by the copper coils he’s trying to assemble and the arrival of two visitors. It’s his first week on the job; this is his first encounter with Roth, his boss. Asked about his choice of career, he says at high school he considered medical school before switching to electrical engineering.

“I love working with tools. I love creating,” he says.

But to win over these young workers, manufacturers have to clear another major hurdle: parents, who lived through the worst US economic downturn since the Great Depression, telling them to avoid the factory. Millennials “remember their father and mother both were laid off. They blame it on the manufacturing recession,” says Birgit Klohs, chief executive of The Right Place, a business development agency for western Michigan.

These concerns aren’t misplaced: Employment in manufacturing has fallen from 17 million in 1970 to 12 million in 2015. The steepest declines came after 2001, when China gained entry to the World Trade Organization and ramped up exports of consumer goods to the US and other rich countries. In areas exposed to foreign trade, every additional $1,000 of imports per worker meant a $550 annual drop in household income per working-age adult, according to a 2013 study in the American Economic Review. And unemployment, Social Security, and other government benefits went up $60 per person.

The 2008-09 recession was another blow. And advances in computing and robotics offer new ways for factory owners to increase productivity using fewer workers.

Not your father's factory worker
When the recovery began, worker shortages first appeared in the high-skilled trades. Electricians, plumbers, and pipefitters are in in short supply across Michigan and elsewhere; vocational schools and union-run apprenticeships aren’t keeping pace with demand and older tradespeople are leaving the workforce. Now shortages are appearing at the mid-skill levels.

“The gap is between the jobs that take no skills and those that require a lot of skill,” says Rob Spohr, a business professor at Montcalm Community College an hour from Grand Rapids. “There’s enough people to fill the jobs at McDonalds and other places where you don’t need to have much skill. It’s that gap in between, and that’s where the problem is.”

Ms. Parks of Grand Rapids Community College points to another key to luring Millennials into manufacturing: a work/life balance. While their parents were content to work long hours, young people value flexibility. “Overtime is not attractive to this generation. They really want to live their lives,” she says.

Roth says he gets this distinction. At RoMan, workers can set set their own hours on their shift, choosing to start earlier or end later, provided they get the job done. That the factory floor isn’t a standard assembly line – everything is custom-built for industrial clients – makes it easier to drop the punch-clocks.

“People have lives outside,” Roth says. “It’s not always easy to schedule doctors appointments around a ‘punch-in at 7 and leave at 3:30’ schedule.”

While factory owners like Roth like to stress the flexibility of manufacturing careers, one aspect is nonnegotiable: location. Millennials looking for a job that allow them to work from home are not likely to get a callback. "I'm not putting a machine tool in your garage," says Roth.